BILL ANALYSIS Ó SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS Senator Ben Hueso, Chair 2015 - 2016 Regular Bill No: AB 33 Hearing Date: 6/13/2016 ----------------------------------------------------------------- |Author: |Quirk | |-----------+-----------------------------------------------------| |Version: |6/6/2016 As Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Jay Dickenson | | | | ----------------------------------------------------------------- SUBJECT: Electrical corporations: energy storage systems DIGEST: This bill makes new pumped hydroelectric storage facilitates eligible for any increased energy storage system targets adopted by the California Public Utilities Commission (CPUC). ANALYSIS: Existing law: 1)Defines "load-serving entity" (LSE) as an electrical corporation (investor-owned utility, or IOU), energy service providers (ESP) or community choice aggregators (CCA). (Public Utilities Code §380(k)) 2)Requires the CPUC to determine appropriate targets, if any, for LSEs to procure energy storage systems. Requires LSEs to meet any targets adopted by the CPUC by 2015 and 2020. Requires publicly owned utilities (POUs) to set their own targets for the procurement of energy storage and then meet those targets by 2016 and 2021. (Public Utilities Code §2835 et seq.) 3)Directs the California Energy Commission (CEC) and the CPUC, where feasible, to authorize procurement of resources to provide grid reliability services that minimize reliance on system power and fossil fuel resources and, where feasible, cost effective, and consistent with other state policy objectives, increase the use of large- and small-scale energy storage. (Public Utilities Code §400) AB 33 (Quirk) PageB of? This bill declares pumped hydroelectric storage facilities eligible for any increases in energy storage procurement targets adopted by the CPUC on or after January 1, 2017. Background Law requires procurement of energy storage systems. AB 2514 (Skinner, 2010), required CPUC to determine appropriate targets, if any, for LSEs to procure energy storage systems by 2015 and 2020. The bill also directed POUs to set their own comparable energy storage system procurement targets. In October of 2013, the CPUC determined energy storage system procurement targets applicable to the IOUs. The CPUC set interim and final targets for the state's largest IOUs - Pacific Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E) and Southern California Edison (SCE) - that, in 2020, require the three IOUs, together, to procure 1,325 megawatts of energy storage.<1> The CPUC decision, while acknowledging that large pumped hydroelectric facilities meet the statutory criteria provided AB 2514, explicitly excluded pumped hydroelectric storage facilities greater than 50 megawatts. The CPUC justified this exclusion as follows: The sheer size of pumped storage projects would dwarf other smaller, emerging technologies; and as such, would inhibit the fulfillment of market transformation goals. The majority of pumped storage projects are 500 MW and over, which means a single project could be used to reach each target within a utility territory. The CPUC, not unreasonably, concluded that an IOU could meet its storage obligation through procurement of a single, large pumped-storage project, thereby crowding out smaller, emerging storage technologies. Such an outcome, the CPUC concluded, would contradict the goal of energy storage market --------------------------- <1> See CPUC Decision 13-10-040. AB 33 (Quirk) PageC of? transformation. The CPUC reports the IOUs have each progressed in meeting their energy storage procurement goals. However, none has yet met its final procurement goal in any category, other than SCE, which has already exceeded the procurement goal for customer-side storage. Of course, in keeping with the CPUC's program rules, this procurement includes no large-scale pumped hydroelectric storage facilities. Large pumped hydroelectric facilities in California. Use of hydroelectric facility to store energy is not new in California. According to the CPUC, there are seven pumped storage facilities that participate in the markets of the California Independent System Operator (CAISO), as shown below: ------------------------------------------------------- |California Existing Pumped Storage Facilities | | | ------------------------------------------------------- |--------------+--------+------------------------------| | Name |Capacity| Owner | | | 1) | | | | | | |--------------+--------+------------------------------| | Castaic | 1250 | LADWP3)/DWR2) | | | | | |--------------+--------+------------------------------| | Helms | 1200 | Pacific Gas and Electric | | | | | |--------------+--------+------------------------------| | San Luis | 440 | DWR2) | | | | | |--------------+--------+------------------------------| | Hyatt | 387 | DWR2) | | | | | |--------------+--------+------------------------------| | Eastwood | 200 | Southern California Edison | | | | | |--------------+--------+------------------------------| AB 33 (Quirk) PageD of? | Thermalito | 84 | DWR2) | | | | | |--------------+--------+------------------------------| | Lake Hodges | 40 | San Diego Water Authority | | | | | |--------------+--------+------------------------------| | Diamond | 40 | Metropolitan Water District | | Valley | | | | | | | |--------------+--------+------------------------------| | O'Neil | 12 | United States Bureau of | | | | Reclamation | | | | | |--------------+--------+------------------------------| | TOTAL | 3,653 | | | | | | ------------------------------------------------------ ------------------------------------------------------- |1) In megawatts. | | | |2) California Department of Water Resources. | | | |3) Los Angeles Department of Water and Power. | | | ------------------------------------------------------- The CPUC also notes that procurement rules allow pumped storage to compete with other energy resources to meet a utility's reliability needs and reports several additional proposed pumped storage projects: ------------------------------------------------------------------- |California and Proposed Pumped Storage Facilities | | | | | ------------------------------------------------------------------- |-----------------+--------+-----------------------+----------------| | Name |Capacity| Developer/Owner | Location | | | 1) | | | | | | | | |-----------------+--------+-----------------------+----------------| | Eagle Mountain | 1300 | Eagle Crest | Riverside | | Project | | | County | AB 33 (Quirk) PageE of? | | | | | |-----------------+--------+-----------------------+----------------| | Lake Elsinore | 600 | Nevada Hydro | Eastern | | Pumped Storage | | | Riverside | | (LEAPS) | | | County | | | | | | |-----------------+--------+-----------------------+----------------| | San Vincente | 500 | City of San Diego/San | San Diego | | Project | | Diego County Water | County | | | | Authority | | | | | | | |-----------------+--------+-----------------------+----------------| |Mulqueeney Ranch | 280 | Brookfield Renewable | Altamont Pass | | | | Energy Group | | | | | | | |-----------------+--------+-----------------------+----------------| | TOTAL | 2,680 | | | | | | | | ------------------------------------------------------------------- ------------------------------------------------------------------- |1) In | |megawatts. | | | | | | | ------------------------------------------------------------------- Many purposes of energy storage procurement targets. The CPUC did not act unreasonably in concluding the energy storage goals of AB 2514 included market transformation: implicit in the imposition of procurement targets is the goal of altering market outcomes from what they would otherwise be. However, whatever its implicit goals, AB 2514 stated a number of explicit goals to be achieved by the energy storage procurement program. Those explicit statutory goals include: Integration of intermittent generation from eligible renewable energy resources into the reliable operation of the transmission and distribution grid. Allowing intermittent generation from eligible renewable energy resources to operate at or near full capacity. AB 33 (Quirk) PageF of? Reducing the need for new fossil-fuel powered peaking generation facilities by using stored electricity to meet peak demand. Reducing purchases of electricity generation sources with higher emissions of greenhouse gases. Eliminating or reducing transmission and distribution losses, including increased losses during periods of congestion on the grid. Reducing the demand for electricity during peak periods and achieve permanent load-shifting by using thermal storage to meet air-conditioning needs. Avoiding or delaying investments in transmission and distribution system upgrades. Using energy storage systems to provide the ancillary services otherwise provided by fossil-fueled generating facilities. Large-scale pumped hydroelectric facilities, like smaller energy storage systems using varying technologies, have the potential to meet these statutory goals. For this reason, the CAISO - always preoccupied with the management of intermittent renewable energy resources - recently urged the CPUC to consider (1) increasing current energy storage system procurement targets to allow for large storage resources while not undermining support for smaller and newer technologies, and (2) earmarking capacity within those procurement targets specifically for pumped storage.<2> --------------------------- <2> COMMENTS OF THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION ON TRACK 2 ISSUES, filed February 2, 2016. AB 33 (Quirk) PageG of? No reason to exclude large pumped hydro, but? There is no obvious, compelling reason why the energy storage procurement targets adopted by the CPUC must exclude pumped hydroelectric storage facilities. Such facilities have the potential to meet the program's statutory goals, such as the integration of intermittent renewable energy resources. However, the CPUC was right to worry that utilities could meet their storage targets by reliance on a small number of very large pumped hydroelectric storage facilities. Such an outcome may harm smaller, still-developing storage technologies. Bill proponents contend smaller and distributed storage technologies already are well-provided for by state procurement targets and subsidies. In any case, existing statute already makes large pumped-storage eligible for the CPUC's storage targets. Therefore, this bill simply restates, with emphasis, existing law. To make clear that existing law does not prevent the CPUC from making pumped hydroelectric storage facilities of any size eligible to meet future energy storage targets the CPUC may adopt, and to ensure the CPUC maintains discretion in adopting future energy storage targets in order to best achieve the state's energy and environmental goals, this analysis recommends the author amend this bill, as follows: Public Utilities Code §2836.8. (a) Beginning January 1, 2017, if the commission increases the targets for a load-serving entity to procure viable and cost-effective energy storage systems, pumped hydroelectric storage facilities of any size that become operational on or after January 1, 2017, shall be eligiblewithout limitto the extent that those facilities meet otherwise applicable requirements. (b) Subdivision (a) is iterative of existing law and does not limit the commission's discretion in developing or adopting targets for a load-serving entity to procure viable and cost-effective energy storage systems. Double Referral. Should this bill be approved by the committee, it will be re-referred to the Senate Committee on Environmental Quality for its consideration. AB 33 (Quirk) PageH of? Prior/Related Legislation AB 2514 (Skinner, Chapter 469, Statutes of 2010) required CPUC to determine appropriate targets, if any, for LSEs to procure energy storage systems. The bill required LSEs to meet any targets adopted by the CPUC by 2015 and 2020. The bill required POUs to set their own targets for the procurement of energy storage and then meet those targets by 2016 and 2021. SB 886 (Pavley, 2015) requires the CPUC to adopt energy storage system procurement targets applicable to every load-serving entity and the governing board of each local publicly owned electric utility to adopt comparable energy storage procurement targets; requires each load-serving entity and locally owned public electric utility to plan for the procurement of energy storage systems before fossil-fuel-based generation; and requires each electrical corporation to propose measures to encourage customers to install energy storage systems. The bill passed the Senate 25-14 and is pending referral in the Assembly. AB 1258 (Skinner, 2013) would have required the CEC to perform a technical analysis of the potential uses of existing hydro-electric and pumped storage facilities to provide additional operational flexibility to integrate eligible renewable energy sources into the grid. The bill was held in Assembly Committee on Appropriations. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No SUPPORT: Association of California Water Agencies Brookfield Clean Power Campaign EDF Renewable Energy Eagle Crest Energy, Inc. San Diego County Water Authority OPPOSITION: None received AB 33 (Quirk) PageI of? ARGUMENTS IN SUPPORT: According to the author: When CPUC implemented AB 2514 (Skinner, 2010) [D.13-10-040], the CPUC elected to place an arbitrary restriction on what types of energy storage would satisfy the procurement mandate. It determined that any pumped hydroelectric storage project over 50 megawatts (MW) in size would not qualify. Unfortunately, this means that large-scale pumped hydroelectric storage does not satisfy any of the numerous requirements placed on IOUs. Because it does not "check a box" for the utilities, there is very little for a utility to procure it. This is despite pumped storage being cost-effective and important in helping the state integrate additional renewable energy onto the grid. AB 33 allows IOUs to purchase pumped hydroelectric storage of all sizes to meet in any future procurement mandate for energy storage. This is not a storage procurement mandate or an increase to an existing procurement mandate. AB 33 simply ensures that pumped hydroelectric storage is not unnecessarily excluded from future energy storage procurement mandates. -- END --